In continuation to the previous week's topic, I've been thinking and reflecting a lot on decisions. It is estimated that the human adult makes almost 35,000 decisions every day. Even if the actual number is a fraction of that, we (The general people and not decision-making scientists) pay little attention to the things that influence our decisions most. One major thing is the baseline of our choices. We increasingly try to think where others are coming from, but we must remember to sense-check ourselves and ask where we come from. We don't make decisions in a vacuum, and probably everyone is aware of that, but are we actively using the proper mental tools to regulate our decision-making?
My journey on that quest started in 2016 when I was first introduced to a few economic concepts. Two stand out, and I still use them as mental tools to sense-check my decisions.
The first is Sunk Cost, the idea that what was spent in the past (e.g., money, time, effort, etc.) should have nothing to do with what we should spend in the future. The classic example is when someone goes to see a movie and spends x amount in tickets, food, and beverages only to realize it's a terrible movie. Most people would stick to seeing the whole movie just because they've spent money. That's called the Sunk Cost Fallacy.
The second is Opportunity Cost, The idea that the real cost of things should factor in the things we give up. Imagine you have a career choice to make:
Option A: to stay at your firm or
Option B: to take the offer from the other firm.
Going with Option B, for example, means foregoing the benefits of Option A.
In consortium with the above concepts, reading behavioral books helped me a lot to sense-check myself. For example, reading Kahneman's famous book "Thinking, Fast and Slow" helped me understand that we, human beings, suffer loss more than we enjoy gains, and that might nudge our decision-making or tilt it away from what is objectively right decision. So, when I had to make a major decision recently, I asked myself whether I was trying to minimize regret and not maximize success. Awareness was enough to give me a second point of view.
I encourage everyone reading this post to search and explore the world of mental models. I’ll give you the first step with this blog post from Farnam Street, which I believe to be one of the best available sources online to get hold of the different types of mental models and enhance your decision-making ability.